Trespassing on the Mineral Estate

Last week the San Antonio Court of Appeals decided Lightning Oil Company v. Anadarko, No. 04-14-001152-CV, a case involving “mineral trespass.” What is interesting about the case is what the court did not decide.

Lightning Oil Company owns two oil and gas leases covering 3,250 acres within the Briscoe Ranch in Dimmit County. The Briscoe Ranch owns the surface but not the minerals in this 3,250 acres. To the south of Lightning’s leases is the Chaparral Wildlife Management Area, a wildlife sanctuary managed by Texas Parks and Wildlife Department. TPWD owns the surface and 1/6 mineral interest in the Chaparral WMA. The Light family (some of whom own Lightning Oil) own the other 5/6 mineral interest. Anadarko holds oil and gas leases on the Chaparral WMA.

The TPWD lease to Anadarko prevents use of the surface of the Chaparral WMA for oil and gas wells except with TPWD consent, and says that Anadarko must use off-site drilling locations “when prudent and feasible.” Anadarko made an agreement with Briscoe Ranch to use the surface of the Ranch to drill horizontal wells under the Chaparral WMA. The first location Anadarko chose is located on the land covered by the Lightning Oil Company leases. So Anadarko proposed to drill a horizontal well from a surface location on Lightning’s lease; the well would penetrate the Eagle Ford formation on Lightning’s lease, but no perforations, or “take points,” in the well would be located on Lightning’s lease.

Lightning sued Anadarko to prevent it from drilling its well, and it sought a temporary injunction to stop the well while the case was pending. After a hearing on Lightning’s application for temporary injunction, the trial court refused to grant the injunction, and Lightning appealed.

The opinion of the San Antonio Court of Appeals (Lightning Oil Co v. Anadarko.pdf ) affirmed the trial court, holding that Lightning had failed to prove a probable, imminent and irreparable injury if Anadarko is allowed to drill its well.

To obtain a temporary injunction, the plaintiff must prove that it can probably prevail when a trial on the merits of its case is held, and that it probably will suffer irreparable injury if the temporary injunction is not granted to maintain the status quo until trial on the merits.

Lightning alleged that Anadarko’s well would trespass on Lightning’s mineral estate. Anadarko argued that its well would not result in a trespass. The Court of Appeals decided not to address that question. Instead, it focused on whether Lightning’s evidence showed that it would probably suffer irreparable harm if the well were drilled. After reviewing the parties’ testimony, the Court held that Lightning’s evidence failed to show probable irreparable harm. The testimony, said the Court, only showed a “potential” for injury, and Lightning failed to show that the potential injury would not be “susceptible to quantification and compensation.”

The more interesting question in this case is the one the Court of Appeals elected not to address — whether the drilling of Anadarko’s well would constitute a trespass. In my experience, operators routinely obtain permission from the surface owner to locate well pads off-lease, but do not consider it necessary to obtain consent of the mineral owner. The general theory is that the owner of the surface estate owns the land from the surface to the center of the earth; the owner of the mineral estate owns only the oil, gas and other minerals under the land. Under this theory, a mineral trespass can occur only if a well actually produces (or perhaps harms) the oil, gas or other mineral under the land. Following this line of reasoning, drilling a well through a formation capable of producing oil or gas would not constitute a mineral trespass. And the right to grant permission to use the surface estate for an off-lease location, under this theory, belongs to the surface owner.

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